Sunday, July 17, 2011

neutral strategy LONG STRADDLE

Example: Buy 1 call;
buy 1 put at same strike
Market Outlook: Large move
in either direction
Risk: Limited
Reward: Unlimited
Increase in Volatility:
Helps position
Time Erosion: Hurts position
BEP: Two BEPs
1. Call strike plus premium paid
2. Put strike minus premium paid

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